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SPECIAL REPORT

Wal-Mart Pricing study round X Another Vision of the Future? Photo courtesy of

The first time ever a carrying a full line of product beat out the Wal-Mart Supercenter as pricing king.

BYJIMPREVOR

ith this iteration, the PRODUCE BUSINESS Wal-Mart ton. It is a significant occurrence. As we have studied market Pricing Report reaches several milestones. First, after market across the country, every conventional supermar- we hit double digits. Yes this time we journey to ket chain has failed to provide consumers with a better price , TX, for our tenth city to be surveyed point than Wal-Mart’s Supercenter concept. and analyzed. Second, as we selected Houston as A&P’s Food Basics beat out Wal-Mart in Detroit, but in order wour target subject this month, it means for the first time we are to include Food Basics in our market basket study, we had to returning to a state to look at a second city. The last time we vis- severely restrict basket because Food Basics did not ited , it was to study . Third, and most important, for carry the full range of items we would normally study. the first time ever a supermarket carrying a full line of product Back in Dallas the Wal-Mart Supercenter lost as well, but it beat out the Wal-Mart Supercenter as pricing king. It was close, was to corporate cousin Wal-Mart’s Neighborhood Market. That less than a third of a percentage point — in fact a statistical tie. small win we attributed to a fluke — either some Manager’s But in the PRODUCE BUSINESS Wal-Mart Pricing Report, as in horse- Special that was running the day of our study or an error in shoes and politics, close doesn’t count. pricing. Generally the prices in the Neighborhood Market and So Fiesta Mart, the chain popularly perceived as being ori- the Supercenter were identical. ented to the Hispanic market, gets to carry the trophy in Hous- In some ways the outcome is surprising. HEB is widely rec-

22 PRODUCE BUSINESS SEPTEMBER Wal-Mart Supercenter vs 3 Chains Price Comparison Houston Texas Prices Available To The General Public

Produce Item Wal-Mart HEB % Over % Over Fiesta % Over Supercenter Wal-Mart Wal-Mart Wal-Mart Apples - Red Delicious, Large $0.88 $0.99 12.500% $0.99 12.500% $0.9912.500% Asparagus $2.93 $2.99 2.048% $2.99 2.048% $3.89 32.765% Avocados, Small $0.50 $0.78 56.000% $0.99 98.000% $0.9998.000% Bananas - Yellow $0.38 $0.39 2.632% $0.39 2.632% $0.40 4.386% Broccoli Crowns $1.44 $1.29 -10.417% $1.69 17.361% $1.7924.306% Cabbage - Green $0.48 $0.44 -8.333% $0.44 -8.333% $0.49 2.083% Cabbage - Red $0.64 $0.69 7.812% $0.69 7.812% $0.59 -7.813% Cantaloupe - Whole $1.50 $1.79 19.333% $2.99 99.333% $1.6912.667% Carrots - Whole 1# Bag $0.58 $0.69 18.966% $0.59 1.724% $0.59 1.724% Cauliflower $2.14 $1.99 -7.009% $1.99 -7.009% $2.49 16.355% Celery $1.14 $1.19 4.386% $1.19 4.386% $1.29 13.158% Cherries $2.96 $4.99 68.581% $4.99 68.581% $3.9934.797% Coleslaw - 1# Bag $1.38 $0.89 -35.507% $1.49 7.971% $1.59 15.217% Cucumbers - Regular $0.50 $0.58 16.000% $0.59 18.000% $0.33-34.000% Eggplant $1.54 $1.29 -16.234% $1.59 3.247% $1.19 -22.727% Garlic $0.39 $0.50 26.904% $0.50 26.904% $0.4924.365% Grapefruit - Red $0.68 $0.89 30.882% $0.59 -13.235%$0.50 -26.471% Grapes - Green Seedless $0.98 $1.99 103.061% $1.79 82.653% $1.2931.633% Grapes - Red Seedless $1.44 $1.59 10.417% $1.69 17.361% $1.6917.361% Green Onions $0.94 $0.59 -37.234% $0.59 -37.234%$0.50 -46.809% Honeydew - Whole $2.98 $2.49 -16.443% $2.99 0.336% $1.69 -43.289% Jar Fruit - Del Monte $2.98 $2.99 0.336% $3.99 33.893% $2.990.336% Kiwi $0.25 $0.33 32.000% $0.33 32.000% $0.3332.000% Lemons $0.28 $0.25 -10.714% $0.25 -10.714%$0.20 -28.571% Lettuce - Green Leaf $1.18 $1.39 17.797% $1.49 26.271% $0.99-16.102% Lettuce - Iceberg $0.77 $1.39 80.519% $1.19 54.545% $0.9928.571% Lettuce - Red Leaf $1.18 $1.39 17.797% $1.49 26.271% $0.99-16.102% Lettuce - Romaine $1.18 $1.39 17.797% $1.49 26.271% $0.99-16.102% Limes - Bulk $0.15 $0.16 6.667% $0.25 66.667% $0.13-16.667% Mangos, Red Small $0.33 $0.50 51.515% $0.50 51.515% $0.99200.000% Mushrooms - White Bulk $2.32 $3.49 50.431% $2.99 28.879% $2.5911.638% Mushrooms - White Packaged$1.34 $1.49 11.194% $1.79 33.582% $1.6926.119% Nectarines - Regular $1.67 $1.99 19.162% $1.99 19.162% $0.99-40.719% Onions - Red $0.93 $1.59 70.968% $1.29 38.710% $0.996.452% Onions - Yellow $0.63 $0.99 57.143% $0.79 25.397% $0.7925.397% Onions - Yellow 3# Bag $1.74 $1.79 2.874% $3.49 100.575% $1.49-14.368% Oranges - Navel Bulk $0.48 $0.50 4.167% $0.50 4.167% $0.50 4.167% Peaches - Regular $0.99 $1.79 80.808% $1.69 70.707% $0.990.000% Pears - Asian $1.24 $1.79 44.355% $1.99 60.484% $0.99-20.161% Peppers - Bell Orange Hot $1.68House $1.29 -23.214% $1.99 18.452% $1.29-23.214% Peppers - Bell Red Hot House$1.68 $1.29 -23.214% $1.99 18.452% $1.29-23.214% Peppers - Bell Yellow Hot $1.68House $1.29 -23.214% $1.99 18.452% $1.29-23.214% Peppers - Bell Green $0.68 $0.99 45.588% $0.69 1.471% $0.50 -26.471% Plums - Regular $1.67 $1.99 19.162% $1.99 19.162% $0.99 -40.719% Potatoes - Red Bulk $0.78 $0.99 26.923% $0.99 26.923% $0.69 -11.538% Potators - Russet 5# Bag $1.57 $1.99 26.752% $1.99 26.752% $1.49 -5.096% Potatoes - Russet Bulk $0.73 $0.88 20.548% $0.89 21.918% $0.50 -31.507% Potatoes - White Bulk $0.73 $0.89 21.918% $0.99 35.616% $0.69 -5.479% Radishes $1.44 $0.99 -31.250% $1.29 -10.417% $0.59 -59.028% Salad - Garden Bag - 1# $1.50 $2.29 52.667% $1.99 32.667% $2.19 46.000% Salad - Spring Bag - 5 oz $2.53 $2.49 -1.581% $2.99 18.182% $2.59 2.372% Spinach - Bulk $0.94 $1.29 37.234% $1.29 37.234% $0.99 5.319% Squash - Zucchini $1.53 $1.29 -15.686% $1.99 30.065% $0.50 -67.320% Strawberries Clamshell 1# $2.67 $2.49 -6.742% $3.99 49.438% $2.39 -10.487% Tomatoes - Hothouse $0.78 $1.79 129.487% $2.69 244.872% $1.99 155.128% Tomatoes - Roma/Plum $0.74 $1.59 114.865% $1.49 101.351% $1.29 74.324% Yams $0.88 $0.88 0.000% $0.99 12.500% $0.69 -21.591% Market Basket Total $70.25 $80.94 15.211% $91.47 30.199% $70.02 -0.331% Source: U.S. Marketing Services ognized as one of Wal-Mart’s toughest And Kroger, with its enormous nation- and most successful competitors, albeit well against Wal-Mart. That may be true, al buying power, seems to simply not regionally. Industry insiders report that but what they don’t have is the lowest care —the Houston store in this study HEB has highly effective merchandising price point. HEB came in at 15.21% over comes in 30% over Wal-Mart! that has enabled the chain to compete Wal-Mart’s prices. Fiesta Mart’s price competitiveness is

SEPTEMBER 2005 PRODUCE BUSI - 23 in a way surprising. If you look at its pro- great merchants, often bought at premi- motions they don’t focus on price. Its slo- um prices, lost their distinctiveness gan is “Your International Store”, and it when integrated into larger chains’ distri- focuses on the customer experience, as it bution and logistics apparatus. says in its promotions: “Our approach is In this case, because Fiesta Mart and a simple one; by blending our variety of Co. were in related but product selection and our special brand different businesses, it seems like they of customer service with an authentic have synced together well with Grocers ‘fiesta’ atmosphere, we provide a unique Supply Co. providing the heft and logis- grocery shopping experience...” tics efficiency needed to keep costs low It is worth noting that in promotions and Fiesta Mart providing the merchan-

Fiesta Mart, the chain popularly perceived as being ori- ented to the Hispanic market, gets to carry the trophy in Houston.

filled with claims of offering “...the high- dising flair to keep the stores fun. est quality meat, grocery, fresh produce In addition, the fact that Grocers Sup- and seafood departments, world class ply Co. is owned by the prominent, phil- delicatessens, beer and fine wines, as anthropic and homegrown Levit family well as a variety of international food probably has given Fiesta Mart a positive products,” I could not find a single refer- image in Houston as opposed to an ence to low prices. Arkansas-based outfit. Reader Service # 107 Speak softly and carry a big stick, Doubtless, though, the focus on fun Teddy Roosevelt used to say, and in the and quality in marketing material is only area of produce pricing Fiesta Mart does partially correct. Long catering to His- just that. panic immigrants, though now with a lot Of course, technically speaking Wal- of attention paid to the second and third Mart can never lose price comparisons — generation of immigrants, Fiesta Mart it offers a low price guarantee. But recog- clearly has a focus on offering low prices nizing that only a fraction of consumers and, probably, on not letting Wal-Mart even know about such a thing, much less steal its customers. are they willing to go through the rigma- After all, Wal-Mart is not only a giant role necessary to get the lower price, we in the , it is a giant in Mexi- think relying on publicly listed prices co as well. In fact, one of the great mys- available without special request is a rea- teries of retailing today is why Wal-Mart sonable approach. has not developed an Hispanic-themed Fiesta Mart’s success in pricing is store. With its supply chain in Mexico interesting because the Fiesta Mart of and low price appeal in the United today is not the simple independent States, it is simply a natural. And doubt- chain it was prior to its acquisition in less such a concept would do very well 2004 by Grocers Supply Co., a significant right in Houston. Perhaps at the expense wholesaler and exporter based in Hous- of Fiesta Mart. ton, TX. Still, until that day comes, Wal-Mart Fiesta Mart’s innovative merchandis- has to struggle to deal with an aggressive ing is now paired with formidable logistic pricing competitor in this market. capabilities from Grocers Supply Co., and One reason Wal-Mart seems to have this may signal a direction for the indus- accepted this situation is that on normal try. Many of Wal-Mart’s competitors have prices, Fiesta Mart is actually higher substantial expertise in distribution and priced than Wal-Mart. It is the sale items logistics, while others are innovative integrated into our market basket that merchants. Fiesta Mart is one of the few really tip the scale. organizations really able to take advan- On the 11 items Fiesta Mart has on tage of both capabilities. Many supermar- sale this week, six of them beat Wal-Mart

Reader Service # 144 ket mergers have been simple failures, as by double-digit margins. On the more

24 PRODUCE BUSINESS SEPTEMBER Wal-Mart Supercenter vs 3 Chains Price Comparison Houston Texas Advertised Prices At HEB and Fiesta Mart. Card Holder Price at Kroger

Produce Item Wal-Mart HEB % Over Kroger % Over Fiesta % Over Supercenter Wal-Mart Wal-Mart Wal-Mart Apples - Red Delicious, Large $0.88 $0.50-43.182% $0.99 12.500% $0.33-62.500% Avocados, Small $0.50 $0.7856.000% $0.50 0.000% $0.500.000% Cabbage - Green $0.48 $0.44-8.333% $0.44 -8.333%$0.33 -31.250% Cantaloupe - Whole $1.50 $0.87-42.000% $2.00 33.333% $1.6912.667% Cherries $2.96 $4.9968.581% $3.99 34.797% $2.991.014% Coleslaw - 1# Bag $1.38 $0.89-35.507% $1.49 7.971% $1.29-6.522% Garlic $0.39 $0.5026.904% $0.14 -64.467%$0.49 24.365% Grapes - Green Seedless $0.98 $1.6972.449% $1.79 82.653% $1.2931.633% Grapes - Red Seedless $1.44 $0.87-39.583% $1.69 17.361% $1.6917.361% Jar Fruit - Del Monte $2.98 $2.990.336% $2.50-16.107% $2.99 0.336% Lettuce - Green Leaf $1.18 $1.3917.797% $0.79 -33.051%$0.99 -16.102% Lettuce - Iceberg $0.77 $1.3980.519% $0.99 28.571% $0.9928.571% Lettuce - Red Leaf $1.18 $1.3917.797% $0.79 -33.051%$0.99 -16.102% Lettuce - Romaine $1.18 $1.3917.797% $0.79 -33.051%$0.99 -16.102% Limes - Bulk $0.15 $0.166.667% $0.10-33.333% $0.13 -16.667% Mangos, Red Small $0.33 $0.330.000% $0.5051.515% $0.330.000% Nectarines - Regular $1.67 $1.49-10.778% $0.67 -59.880%$0.99 -40.719% Onions - Yellow $0.63 $0.9957.143% $0.79 25.397% $0.33-47.619% Oranges - Navel Bulk $0.48 $0.25-47.917% $0.50 4.167% $0.504.167% Peaches - Regular $0.99 $1.2930.303% $1.69 70.707% $0.39-60.606% Peppers - Bell Green $0.68 $0.44-35.294% $0.69 1.471% $0.50-26.471% Potatoes - White Bulk $0.73 $0.8921.918% $0.99 35.616% $0.50-31.507% Salad - Garden Bag - 1# $1.50 $1.500.000% $1.50 0.000% $2.1946.000% Spinach - Bulk $0.94 $1.2937.234% $1.29 37.234% $0.69-26.596% Squash - Zucchini $1.53 $0.89-41.830% $0.57 -62.745%$0.50 -67.320% Strawberries Clamshell 1# $2.67 $1.99-25.468% $2.00 -25.094%$2.39 -10.487% Tomatoes - Hothouse $0.78 $1.4991.026% $2.69 244.872% $0.8812.821% Market Basket Total 70.25 74.556.115% 79.4713.118% 64.09 -8.772% Source: U.S. Marketing Services To Learn More...

If you’ve found value in the PRODUCE BUSINESS Wal-Mart Pricing Report, make sure you are in Atlanta for this year’s PMA Convention.

On Saturday, November 5, 2005 Jim Prevor, president and editor–in–chief of PRODUCE BUSINESS and chief analyst of the PRODUCE BUSINESS Wal-Mart Pricing Report, will give a special workshop devoted to further exploration of the topics raised in this series.

The workshop will feature the unveiling of a new PRODUCE BUSINESS Wal-Mart Pricing Report, focused on Atlanta, and will explore both information and the implications of that information that have not previous- ly been published. Attendees will have the opportunity to ask questions and will receive a special handout to provide important take–home value. For information on how to register, please contact:

Produce Marketing Association P. O. Box 6036 Newark DE 19714-6036 Ph: 302-738-7100 Fax: 302-731-2409 www.pma.com

SEPTEMBER 2005 PRODUCE BUSI - 25 limited total market basket of items put How They Stack Up Against Wal-Mart Supercenter on sale this week by either Fiesta, HEB or Kroger, Fiesta Mart comes in 8.772% % over % over % over under Wal-Mart’s prices. Many of its on- Region Store Wal-Mart Store Wal-Mart Store Wal-Mart sale items are 40% or 60% under Wal- Mart prices. Since the larger market bas- Connecticut Super Stop & Shop ...... 23% Shaws ...... 34% ...... 36% ket was a virtual tie, these deep dis- counts on sale items mean that Fiesta Salt Lake City Harmon’s ...... 2% Smith’s ...... 6% Albertson’s ...... 12% Mart is actually more expensive than Wal-Mart on its non-sale items. South Florida Super Target ...... 22% ...... 31% Winn-Dixie ...... 52% Texas is a big state known for big ideas, and an interesting idea coming out Dallas, Texas Albertson’s ...... 23% Brookshires ...... 7% Kroger ...... 19% of the Houston version of the PRODUCE Neighborhood Market . . . –1.2% Tom Thumb ...... 27% BUSINESS Wal-Mart Price Report is this: Whereas big national chains like Kroger Portland, OR Albertson’s ...... 30% ...... 22% ...... 27% seem to have given up on competing on Safeway ...... 37% price and great regional performers like HEB seem to feel they don’t have to com- Phoenix, AZ Albetson’s ...... 22% Bashas’ ...... 25% Fry’s ...... 15% pete on price, an amalgam of innovative Safeway ...... 17% merchandising with sophisticated logis- tics may offer another vision of the Palm Springs, CA Albertson’s ...... 19% Jensen’s ...... 60% ...... 16% future. ...... 20% Can it be replicated? How profitable is this privately owned company? All Detroit, MI A&P’s Food Basics ...... –17% ...... 24% Kroger ...... 28% things we don’t know but things that will ...... 3% all be revealed in time as the PRODUCE BUSINESS Wal-Mart Pricing Report rolls St. Louis, MO Dierbergs ...... 22% ...... 14% across the nation to more markets. Next stop: Atlanta. Houston, TX HEB ...... 15% Kroger ...... 30% Fiesta Mart ...... – 0.3% pb Do People in Portlan Prefer your Potatoes Do kids in Kansas crave corn? Whatever research questions you New Product Category have, U.S. Marketing Services can Advertising Price and Concept Strategic Management Tracking DistributionDevelopment & Analysis help. Checks Testing 24 years of marketing and research experience Specializing in theproduce industry U.S. Marketing Services Means Trade and consumer research Information and answers that are fast and affordable Analysis that is meaningful and insightful Direction and recommendations that are usable and conclusive Free Consulta-

U.S. Marketing Services (707) 996-9018 [email protected] Reader Service # 153

26 PRODUCE BUSINESS SEPTEMBER